Private credit
Also: Direct lending
Lending to companies outside the public bond market, increasingly packaged for retail investors through vehicles that redeem only periodically.
Private credit is a loan that never becomes a traded security. The lender is a fund rather than a bank, the borrower is usually a middle-market company, and there is no daily price because no market makes one. That last property is what makes the packaging question interesting.
How retail money reaches it
Through semiliquid vehicles: interval funds, tender offer funds and non-traded perpetual-life business development companies. All three are closed-end structures, so none is bound by the 15 percent illiquid asset cap that restricts traditional open-end mutual funds. Total net assets across the three rose from 15 billion dollars in 2018 to 388 billion in 2025, while total mutual fund net assets grew by 33 percent over the same period.
Where the liquidity promise actually binds
Only interval funds carry a liquidity mandate tied to repurchase offers, and they are required to hold full liquidity only for the amount offered during that specific repurchase period, with no such requirement at any other time. Non-traded BDC repurchases are typically capped around 5 percent of net asset value per quarter and may be curtailed. A Federal Reserve note records that private credit exposure in interval funds has been expanding significantly.
Questions
- What does private credit mean?
- Lending to companies outside the public bond market, by a fund rather than a bank. There is no traded price because no market makes one, which is why the vehicles that hold it redeem periodically rather than daily.
- How do retail investors get private credit exposure?
- Through semiliquid vehicles — interval funds, tender offer funds and non-traded business development companies. Being closed-end, none is bound by the 15 percent illiquid asset cap that applies to open-end mutual funds.